According to a press release published this morning, Rio Tinto – one of the world’s largest metals and mining corporations – will conduct a strategic review of its ISAL smelter (situated just outside Hafnafjörður) to determine the operation’s “ongoing viability and explore options to improve its competitive position.”
Aluminium production at the ISAL (The Icelandic Aluminium Company) smelter began in 1969. The smelter currently employs roughly 500 people. Rio Tinto had previously reduced the smelter’s capacity to 85 per cent, owing to a lack of profitability.
In a press release this morning, Rio Tinto (which is the sole owner of ISAL) expects ISAL to remain, “unprofitable in the short to medium term in the challenging conditions facing the aluminium industry, due to the smelter’s uncompetitive energy costs and historically low aluminium prices.”
Rio Tinto will continue discussions with the Government of Iceland and the utility company Landsvirkjun (which provides power for the smelter) on how the smelter can return to profitability and become competitive in the global market. The corporation is considering all options in its strategic review (expected to be completed during the first half of 2020), “including curtailment and closure.”
The press release quotes Rio Tinto Aluminium chief executive Alf Barrios: “We have worked intensively to improve ISAL’s performance, however, it is currently unprofitable and cannot compete in the challenging market conditions due to its high power costs.”
Rio Tinto adds that it aims to work closely with stakeholders who have a shared interest in the smelter’s future, including the government, Landsvirkjun, employees, unions, and the local community.
Taken Aback by the News
In an interview earlier today, Reinhold Richter – principal union representative for ISAL employees – told Vísir that the news of the smelter’s possible closure had taken employees by surprise. The staff needs to “sleep on it,” Reinhold told Vísir.
A new wage agreement with ISAL has been drafted by the Confederation of Icelandic Enterprise (SA); however, SA and ISAL’s team of negotiators have not bee given permission to sign the agreement by Rio Tinto.
“Solemn News,” Says the Mayor
Vísir also spoke to Mayor of Hafnarfjörður Rósa Guðbjartsdóttir, who was apprehensive.
“[ISAL] is one of the largest employers in town. It has operated for decades and it means a lot to the entire community. It’s not only a large and pleasant place of work, but it has also had a synergistic effect on other companies in town.”